Do you want to get a handle on export compliance in 2015? Implementing a formal Export Management Compliance Program can be quite intimidating and expensive, especially for small and medium sized companies. An EMCP requires a significant commitment of time  on the part of management and usually involves hiring an outside consultant for the initial set up. There is no question that a written EMCP is a good investment for any company to make. An EMCP establishes clear accountability, written instructions, and reduces risk of non compliance. If the exporter has not experienced problems or incurred any fines it is easy to make an EMCP a “back burner” issue. If your company has not implemented an EMCP it is still good business practice to take some basic compliance steps. While these steps cannot take the place of a written EMCP they will help reduce risk of non compliance.  To get started I suggest the following:

• Review and confirm correct Harmonized and Schedule B codes
• Check EAR regulations for correct exception codes and license or NLR designations
• If exporting under ITAR you need a responsible trained officer
• Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists
• Review export documentation for possible improvements

Contact mitch@52.91.45.227 for help.

 In a previous post I discussed Red Flags to be aware of in export transactions. Here is more detail from the Bureau of Industry and Security about the Consolidated Screening List. The Department of Commerce lists that are included in the Consolidated Screening List are: Denied Persons List, Unverified List, and Entity List. For help with export compliance contact mitch@52.91.45.227

Consolidated Screening List

Prior to taking any further actions, users are to consult the requirements of the specific list on which the company, entity or person is identified by reviewing the webpage of the agency responsible for such list. The links below will connect you to the specific webpage where additional information about how to use each specific list is contained.

Department of Commerce – Bureau of Industry and Security

Here is a list from the Bureau of Industry and Security (BIS) website of things to look for in an export transaction. My next post will discuss “Lists of Parties of Concern” including “Denied Persons”.  Make sure you are not doing business with the bad guys. A little due diligence up front saves a lot of trouble later on.

• The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS’] list of denied persons.
• The customer or purchasing agent is reluctant to offer information about the end-use of the item.
• The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.
• The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.
• The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.
• The customer has little or no business background.
• The customer is unfamiliar with the product’s performance characteristics but still wants the product.
• Routine installation, training, or maintenance services are declined by the customer.
• Delivery dates are vague, or deliveries are planned for out of the way destinations.
• A freight forwarding firm is listed as the product’s final destination.
• The shipping route is abnormal for the product and destination.
• Packaging is inconsistent with the stated method of shipment or destination.
• When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.

For help with export compliance contact mitch@52.91.45.227

In the September issue of Logistics Management Magazine, Mark Pearson has written an excellent article on supply chain risk management (Pearson on Excellence p.22). Based on a survey of senior executives, the article names information technology and global economic turmoil as the most common and impactful drivers of supply chain risk. Pearson describes different supply chain risk management investments made by respondents and the ROI’s reported by management. I would add that export and import compliance is also a very big risk factor in supply chain management. Fines and penalties for non-compliance are high enough to be worthy of C-level attention. What you don’t know can hurt you.

If you would like compliance help contact mitch@52.91.45.227

This afternoon I participated in a webinar presented by Customs Info/Descartes on “Best Practices in Global Classification Compliance”. The first half of the webinar consisted of a good refresher about classification compliance. The Customs Modification Act requirement of reasonable care was defined as a solid process of research support and documentation. The presenter reminded the audience that:

• Classification is subjective- tariff schedules do not necessarily keep up with technology
• Customs definitions can differ from industry definitions
• Different interpretations exist between countries and also between ports within the same country

The basic components of a best in class process are:

1. Break down items from universe into groups
2. Research- even if you think you know the correct classification    customsinfo.com is a good tool
3. Identify necessary info needed for classification such as materials, dimensions, intended use, etc
4. Documentation- needed to support your determination
5. Automation- implementing a software classification tool will improve efficiency and productivity
6. On-going maintenance and monitoring for changes in HTS binding rulings and in your products is essential

Supporting documentation includes

• spec sheets, drawings, photos
• info requests from engineers, scientists, chemists, etc
• HTS chapter and section notes that apply to your product
• explanatory notes
• informed compliance publications
• customs rulings that apply to your product
• record keeping (5 years)

Contact Ad Hoc Logistics for help with classification and compliance.

Many exporters automatically enter EAR 99 on their shipping documents without really knowing what this designation means. EAR 99 is a basket category for items that are subject to the EAR (Export Administration Regulations) but not on the CCL (Commerce Control List).  The CCL lists “controlled” items which may require a license for export. The CCL is made up of a classification of items by ECCN (Export Control Classification Number).  So a basic export compliance step is to verify if your items are “controlled” needing an ECCN or if they can be shipped under EAR 99. If an ECCN is listed you then need to determine if a license is required by checking “Reasons for Control” and destination country lists. There are 3 ways to determine an ECCN:

1) Check with the manufacturer, producer, or developer.

2) Self classify using the CCL.

3) Official request to BIS (Bureau of Industry and Security) using the SNAP-R tool @ bis.gov

Contact adhoclogistics.com for help in determining your ECCN.

In a previous post I discussed the importance of an Export Management Compliance Program. Implementing an EMCP is a major undertaking so it is often delayed for lack of resources. While you may be in this position, there are still valid export compliance steps that you can take. The first step in export compliance is to review Schedule B codes used for export and confirm that AES entries are correct. On 6/24 I participated in a Census Bureau webinar titled “The Basics of Export Compliance: Classifying Your Product”. This training proved to be a good review for me and would be very helpful for export compliance novices. Topics covered included:

• Schedule B search engine demo
• How to use headings
• Difference between Harmonized codes and Schedule B
• In depth discussion of the 6 General Rules of Interpretation
• “Essential Character” defined
• “End Use” determination

Ad Hoc Logistics can help your company with export compliance. If you need help with Schedule B codes contact  adhoclogistics.com